Weekly Feed Market Commentary

Published 27 May 15

Grains

After increasing towards the end of last week, grain prices have generally fallen compared with last Tuesday’s (19 May) values. UK feed wheat futures (Nov-15) closed at £120.70/t on Tuesday (26 May), down £1.55/t on the previous week. Chicago wheat (Dec-15) fell by $6.52/t week on week to close at $189.49/t yesterday (26 May). Chicago maize futures closed at $146.95 on Tuesday, down $2.75/t compared with last week.

Concerns over the US wheat crop appear to have abated following yesterday’s (26 May) USDA crop progress and conditions report. For the week ending 24 May, 81% of US winter wheat was described as being in ‘fair’ to ‘excellent’ condition, compared with 56% at same time last year. Similarly, 96% of spring wheat was rated to be in ‘fair’ to ‘excellent’ condition, above the previous five year average of 79%.

The latest update of Defra’s UK cereal supply and demand forecasts for 2014/15 was released on 21 May. Wheat consumption in animal feed was estimated at 6.68Mt, 8% higher year on year while barley usage in feed was projected to decline by 4% compared with 2013/14. Maize usage was estimated at 1.10Mt, slightly higher than the previous forecast made in March, but 13% lower year on year.  The forecast for total cereal (wheat, barley, maize and oats) demand in animal feed has been revised 251Kt higher compared with the previous estimates and now stands at 11.4Mt (1% higher year on year). This revision has been driven by higher than expected feed demand by cattle, pigs and sheep.

The EU wheat export campaign is progressing well, with season-to-date export commitments for soft wheat reaching 29.1Mt, just 1.9Mt below the EU Commission’s full season forecast for common wheat forecast. Defra’s latest UK cereals balance sheet further clarified the potential extent of the size of the wheat carry over into 2015/16. Over 1Mt more wheat is forecast to be in commercial end season stocks than a year ago, though the 2014/15 opening stock level is under review by Defra.

Protein meal

As at Tuesday’s close (26 May), Chicago soyabeans futures (Nov-15) were $332.41/t, a contract low and $11.29/t lower than last week’s (19 May) price. Paris rapeseed (Nov-15) futures have continued their upward momentum, settling at €365.00/t, up from €359.75/t last week. UK rapemeal prices (34%, ex-mill Erith, spot delivery) were £204/t on Friday (22 May), up £14/t on the previous week. Brazilian soyameal prices (48%, ex-store Liverpool, spot delivery) was £307/t on Friday (22 May), up £3/t week on week.

Strong planting progress in the US and the restrengthening of the US dollar against a basket of currencies (reducing export prospects) were behind the falls in soyabean prices. Furthermore, the Argentine government increased its estimate of the 2014/15 soyabean crop by 1Mt to a record 60Mt, compared with 53.4Mt in the previous season. Both Paris rapeseed and Canadian canola futures withstood the pressure from the soyabean market as forecasts indicated lower rapeseed production in 2015/16. In their latest forecasts, Agriculture and Agri-Food Canada project a reduction in the Canadian canola area. The latest estimates for 2015/16 planted area was reduced by over 0.5Mha, compared with the April outlook, to 7.9Mha. As a result, production was revised down by 1.1Mt to 14.9Mt and exports are expected at 8Mt, down from 8.4Mt previously.

On top of reduced production from Canada, the Association of German Farm Cooperatives forecasts that German winter rapeseed output will fall 16.2% year-on-year to 5.23Mt in 2015. Over 99% of German rapeseed output has come from winter planted crops in the last five years. If realised, this would be the smallest winter rapeseed crop since 2012 (4.81Mt) but in line with the average for 2010-2014.